Govt expenditure threatens "the fight against poverty"

The government of Malawi is cash-strapped and running into a deficit of US $159.3 million from a projected $23.1 million. It also still caught up in "non-priority" spending areas, analysts say.

Finance Minister Friday Jumbe declared last year that the theme for the budget was "Facing our realities and living within our means in the fight against poverty." Last week he asked parliament for additional funding of US $96 million to wrap up the fiscal year ending in June.

"Realities have unfolded during the course of the year and it has proved difficult for government to go without considering the revision of the budget," Jumbe said, at the start of two weeks of parliamentary deliberations to consider his supplementary budget.

The government has been heavily criticised for overspending. Recently President Bakili Muluzi appointed what analysts said was an "over-bloated" cabinet of 46 ministers - previously 39 - for a small donor-dependent economy. Cabinet ministers earn US $3,297 per month.

Malawi recently experienced a food shortage crisis following drought and erratic rainfall, which forced government to spend an unplanned US $83.5 million on importing 250,000 mt of food.

But over-expenditure was exacerbated by payment of ghost-workers' salaries, especially by the Ministry of Education, and non-disbursement of funds from aid partners.

A bank interest rate of 40 percent in comparison to inflation at 14.8 percent has also adversely affected domestic borrowing by government, Jumbe argued.

Parliament passed a budget last year with total revenues and grants estimated at US $474.1 million. Of this amount, US $298.2 million would be generated by domestic resources, while US $175.9 million would come from foreign sources in the form of grants and HIPC (Highly Indebted Poor Countries) debt relief.

"The current level of domestic debt stock is unsustainable and, if not reversed, would further destabilise the economy and undermine the implementation of the MPRSP [Malawi Poverty Reduction Strategy Paper]," Jumbe said, adding that this development meant government was breaking the law.

Louis Chimango, a former finance minister and now of the main opposition Malawi Congress Party (MCP), cited state residences, the Ministry of Foreign Affairs, the National Intelligence Service, and the National Assembly itself as non-priority areas that had required additional funding.

"We need to remind government, though, that they should be aware of the costs. Businesses are folding up. We're milking thin cows," Chimango said.

Jan Jaap Sonke, an MP for the ruling United Democratic Party and a former deputy finance minister in Muluzi's government, said there were "uncleared clouds" over how US $83.5 million for food imports was accounted for.

"The Finance Act limits domestic borrowing up to 20 percent of revenue. We have exceeded that many times - we're breaking the law," Sonke told parliament.

The International Monetary Fund is withholding US $47 million in aid due to reported excessive expenditures.